One strategy being discussed is to combine diverse businesses into a single entity. Let’s say you’re an accountant who also invests in real estate, managing hotels and other properties. Depending on how the IRS writes the regulations, it might make sense to put everything in one company, according to Richard Kollauf, director of wealth services at BMO Private Bank.
Instead of appearing to the IRS to be an accountant -- a service-based profession that wouldn’t qualify for the pass-through break over the income limit -- you look more like a real estate magnate, who would qualify because of large capital investments.
Or, if your business makes the majority of its money through your service profession, the opposite strategy could work. By breaking different businesses apart, service business owners could have at least some of their income qualify for the pass-through deduction. A medical practice might do a fair amount of debt collection or other back-office support. Those divisions could be spun off into a separate “management company,” which could qualify for the break.
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